Lesson 2

ACC
OUN
T IN G
DE F
I NE D
•American Institute of Certified Public Accountant
(AICPA)
•Accounting Standard Council and Statement of
Financial Accounting Standard No. 1
•American Accounting Association
American Institute of Certified
Public Accountants (AICPA)
• It is the art of recording,
c
classifying and summarizing
in a significant manner and in
terms of money, transaction
and events, which are, in part
at least, of a financial
character, and interpreting the
results thereof.
American Standard Council & Statement of
Financial Accounting Standard No. 1
• It is a service activity.
• Its function is to provide
quantitative information,
primarily financial in
nature, about economic
entities that is intended to
be useful in making
economic decisions.
American Accounting Association
• It is a process of identifying,
measuring and
communicating economic
information to permit
judgments and decisions by
means of the information.
Accounting as the Language of
Business
Specialized Form of Communication
for Decision Making
• Buying & Selling
• Pricing Policies
• Sales
• Cash Available
• Debtors & Creditors & How Much
• Cost & Expenses
• Profit & Loss
• Return on Investments
• Liabilities and other obligation
BOOKKEEPING vs ACCOUNTING
• The recording of business • Is more complex process,

transactions in a systematic which includes the design
and chronological manner. and installation of Financial
System: the analysis and
Bookkeeping is procedural. It interpretation of financial
is the “how” of accounting. statement for business
decisions. It also includes
budgeting, planning,
auditing and control as well
as advisory services.
ACCOUNTING vs AUDITING
• Ceases when financial • Examines the financial

statements are prepared statements to ascertain
whether they are with
GAAP (Generally
Accepted Accounting
Principles)
ACCOUNTING vs
ACCOUNTANCY
Referring to the Refers to the

field of accounting
accounting profession
theory and
itself
practice.
PHASES of ACCOUNTING
I – RECORDING PHASE
Journalization – process that business transactions having been
analyzed, the debit and credit parts of the transactions are recorded
in a journal.
II – CLASSIFYING PHASE-
Posting – reduces the effects of numerous transactions in useful
group of categories
III – SUMMARIZING PHASE
Preparation of Financial Statements ( Trial Balance)
IV – INTERPRETING or ANALYZING PHASE
to evaluate the liquidity, profitability and solvency of the business
organization.
PHASES of ACCOUNTING
1. RECORDING PHASE
General Journal
Special Journal
JOURNALIZING
2. CLASSIFYING PHASE
General LEDGER
SUBSIDIARY LEDGER
POSTING
3. SUMMARIZING
PHASE WORKSHEET
TRIAL BALANCE/ FINANCIAL STATEMENTS

LIQUIDITY,
4. PROFITABILITY &
SOLVENCY
INTERPRETING/ANALYZING
PHASE
SPECIALIZED
ACCOUNTING
PROFESSION of ACCOUNTING
FIELDS
Private Accounting
(Business & Not-for-Profit)
 To assist management in the

planning and controlling of
the enterprises operation
which includes maintenance
of records, preparation of
budgets, allocation of costs of
business is obliged to pay.
Public Accounting
Certified Public Accountant (CPA)
Composed of individual
practitioners, small
accounting firms and
large multinational
organizations that render
independent and expert
financial services to the
public.
SPECIALIZED
ACCOUNTING FIELDS
PRIVATE ACCOUNTING PUBLIC ACCOUNTING
FINANCIAL INTERNAL
ACCOUNTING AUDITING
AUDITING
COST TAX (External
ACCOUNTING ACCOUNTING Auditing)
ACCOUNTING BUDGETARY
EDUCATION ACCOUNTING
TAX
SERVICES
ACCOUNTING INTERNATIONAL
SYSTEM DESIGN ACCOUNTING
MANAGEMENT
ADVISORY
SERVICES
SOCIO-ECONOMIC GOVERNMENT
ACCOUNTING ACCOUNTING
PAYROLL
ACCOUNTING
FINANCIAL ACCOUNTING
RECORDING OF
TRANSACTIONS FOR
BUSINESS
ENTERPRISE
COST ACCOUNTING
DETERMINATION
AND THE CONTROL
OF COST.
BUDGETARY ACCOUNTING
PLANS OF OPERATION
FOR A PERIOD AND
THROUGH REPORTS AND
SUMMARIES, PROVIDES
COMPARISON OF ACTUAL
OPERATION WITH
PREDETERMINED PLANS.
TAX ACCOUNTING
PREPARATION OF TAX
RETURNS AND THE
CONSIDERATION OF
THE TAX
CONSEQUENCES OF
PROPOSED BUSINESS
TRANSACTIONS
PAYROLL ACCOUNTING
PREPARATION
OF PAYROLL OF
A FIRM WHICH
INCLUDES
COMPUTATION
OF EMPLOYEES’
COMPENSATION
, WORKING
RATES, OTHER
RENUMERATIO
NS, OVER TIME
PAY, INCOME
TAX, AND
OTHER
BENEFITS.
ACCOUNTING SYSTEM
DESIGN
DESIGN AND
IMPLEMENT
PROCEDURES
FOR
ACCUMULATIONS
AND REPORTING
OF FINANCIAL
DATA
SOCIO-ECONOMIC
ACCOUNTING
MEASURES OF SOCIAL
COSTS AND BENEFITS
WHICH HAVE
PREVIOUSLY BEEN
CONSIDERED
IMMEASURABLE
INTERNAL AUDITING
DETERMINES THE
OPERATIONAL
EFFICIENCY OF THE
COMPANY
REGARDING
PROTECTION OF
COMPANY’S ASSETS,
ACCURACY AND
RELIABILITY OF THE
ACCOUNTING DATA,
AND ADHERENCE TO
PRESCRIBED
MANAGERIAL
POLICIES.
INTERNATIONAL
ACCOUNTING
SPECIAL PROBLEM
ASSOCIATED WITH
THE INTERNATIONAL
TRADE OF MULTI-
NATIONAL BUSINESS
ORGANIZATION
GOVERNMENT ACCOUNTING
FOCUSES ON THE
PROPER CUSTODY
OF GOVERNMENT
FUNDS AND THEIR
PURPOSES.
ACCOUNTING EDUCATION
INVOLVES ACCOUNTING
PROFESSORS, ALSO OFTEN
ENGAGES IN RESEARCHES,
AUDITING, TAX
ACCOUNTING, AND OTHER
AREAS OF ACCOOUNTING
ON A PART-TIME OR
SONSULTANCY BASIS
PUBLIC ACCOUNTING
EXTERNAL
AUDITING
Activity involving an independent
review and examination of the
accounting records.
TAX SERVICES
Accountant’s preparation of
the clients income tax
returns, business and trade
taxes. He represents the
clients in tax assessment and
investigations.
MANAGEMENT
ADVISORY SERVICES
Deals with specific problems

that confront enterprise
managers at various
organizational levels.

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ACC

• The recording of business • Is more complex process,

• Ceases when financial • Examines the financial

Referring to the Refers to the

TRIAL BALANCE/ FINANCIAL STATEMENTS

 To assist management in the

Deals with specific problems

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